Bay Street News

HCI Group Reports Second Quarter 2024 Results

Pre-Tax Income of $76 million
Diluted EPS of $4.24
Gross Loss Ratio of 29.7%

TAMPA, Fla., Aug. 08, 2024 (GLOBE NEWSWIRE) — HCI Group, Inc. (NYSE:HCI), a holding company with operations in homeowners insurance, information technology services, real estate, and reinsurance, reported pre-tax income of $76.0 million and net income of $57.1 million in the second quarter of 2024. Net income after noncontrolling interests was $54.1 million compared with $12.4 million in the second quarter of 2023. Diluted earnings per share were $4.24 in the second quarter of 2024, compared with $1.28 diluted earnings per share, in the second quarter of 2023.

Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the second quarter of 2024 was $56.7 million, or $4.21 diluted earnings per share compared with adjusted net income of $14.2 million, or $1.22 diluted earnings per share, in the second quarter of 2023. This press release includes an explanation of adjusted net income as well as a reconciliation to net income and earnings per share calculated in accordance with generally accepted accounting principles (known as “GAAP”).

Management Commentary
“In the second quarter, HCI Group delivered another quarter of solid profitability driven by strong underwriting execution,” said HCI Group Chairman and Chief Executive Officer Paresh Patel. “The results highlight the power of our technology. In future periods, we plan not only to replicate this success but also to explore new ways to exploit our technology and capitalize on new opportunities.”

Second Quarter 2024 Commentary
Consolidated gross premiums earned in the second quarter increased to $263.6 million from $181.9 million in the second quarter of 2023 driven primarily by growth in Florida, including the assumption of policies from Citizens.

Premiums ceded for reinsurance in the second quarter were $76.7 million compared with $66.4 million in the second quarter of 2023. Premiums ceded represented 29.1% of gross premiums earned in the second quarter of 2024 compared with 36.5% in the second quarter of 2023.

Net investment income in the second quarter was $16.9 million compared with $8.8 million in the second quarter of 2023. The $8.1 million increase was primarily attributable to an increase in interest income from cash, cash equivalents, available-for-sale securities, and an increase in income from real estate investments.

Losses and loss adjustment expenses in the second quarter were $78.3 million compared with $61.9 million in the second quarter of 2023.  The gross loss ratio in the second quarter was 29.7% compared to 34.0% in the second quarter of 2023.  The decline in the gross loss ratio was driven primarily by the continued decline of claims and litigation frequency in Florida.

Policy acquisition and other underwriting expenses in the second quarter were $23.5 million compared with $22.6 million in the second quarter of 2023, representing 8.9% of gross premiums earned in the second quarter of 2024 compared with 12.4% in the second quarter of 2023.

General and administrative personnel expenses in the second quarter increased to $17.5 million from $14.3 million in the second quarter of 2023. General and administrative personnel expenses represented 6.6% of gross premiums earned in the second quarter of 2024 down from 7.8% in the second quarter of 2023.

Year-to-Date 2024 Results
For the six months ended June 30, 2024, the company reported pre-tax income of $153.5 million and net income of $114.1 million. Net income after noncontrolling interests was $101.7 million compared with $27.8 million for the first six months ended June 30, 2023. Diluted earnings per share were $8.04 for the first six months ended June 30, 2024, compared with $2.81 diluted earnings per share, for the six months ended June 30, 2023.

Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the six-month period was $111.7 million, or $7.86 diluted earnings per share compared with adjusted net income of $31.6 million, or $2.72 diluted earnings per share, in the same period of 2023. An explanation of this non-GAAP financial measure and reconciliations to the applicable GAAP numbers accompany this press release.

Consolidated gross premiums earned for the six months of 2024 increased to $520.2 million from $362.0 million in the same period of 2023 driven primarily by growth in Florida, including the assumption of policies from Citizens.

Premiums ceded for reinsurance for the six months of 2024 were $144.8 million compared with $136.9 million for the six months of 2023. Premiums ceded represented 27.8% of gross premiums earned for the six months of 2024 compared with 37.8% in the six months of 2023.

Net investment income for the six months of 2024 was $30.9 million compared with $26.5 million for the six months of 2023. The increase was primarily attributable to an increase in interest income from cash, cash equivalents, and available-for-sale securities, offset by a decrease in income from real estate investments.

Losses and loss adjustment expenses for the six months of 2024 were $158.2 million compared with $122.5 million for the six months of 2023.  The gross loss ratio decreased to 30.4% compared to 33.8% for the six months ended June 30, 2023. The decline in the gross loss ratio was driven primarily by the continued decline of claims and litigation frequency in Florida.

Policy acquisition and other underwriting expenses for the six months of 2024 were $45.6 million compared with $45.3 million for the six months of 2023, representing 8.8% of gross premiums earned in the six months of 2024 compared with 12.5% in the six months of 2023.

General and administrative personnel expenses for the six months of 2024 increased to $33.7 million from $27.8 million for the six months of 2023. General and administrative personnel expenses represented 6.5% of gross premiums earned in the six months of 2024 down from 7.7% in the six months of 2023.

Conference Call
HCI Group will hold a conference call later today, August 8, 2024, to discuss these financial results. Chairman and Chief Executive Officer Paresh Patel, Chief Operating Officer Karin Coleman and Chief Financial Officer Mark Harmsworth will host the call starting at 4:45 p.m. Eastern time.

Interested parties can listen to the live presentation by dialing the listen-only number below or by clicking the webcast link available on the Investor Information section of the company’s website at www.hcigroup.com.

Listen-only toll-free number: (888) 506-0062
Listen-only international number: (973) 528-0011
Entry Code: 357144

Please call the conference telephone number 10 minutes before the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at (949) 574-3860.

A replay of the call will be available by telephone after 8:00 p.m. Eastern time on the same day as the call and via the Investor Information section of the HCI Group website at www.hcigroup.com through August 8, 2025.

Toll-free replay number: (877) 481-4010
International replay number: (919) 882-2331
Replay ID: 50883

About HCI Group, Inc.
HCI Group, Inc. owns subsidiaries engaged in diverse, yet complementary business activities, including homeowners insurance, information technology services, insurance management, real estate, and reinsurance. HCI’s leading insurance operation, TypTap Insurance Company, is a technology-driven homeowners insurance company. TypTap’s operations are powered in large part by insurance-related information technology developed by HCI’s software subsidiary, Exzeo USA, Inc. HCI’s largest subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., provides homeowners insurance primarily in Florida. HCI’s real estate subsidiary, Greenleaf Capital, LLC, owns and operates multiple properties in Florida, including office buildings, retail centers and marinas.

The company’s common shares trade on the New York Stock Exchange under the ticker symbol “HCI” and are included in the Russell 2000 and S&P SmallCap 600 Index. HCI Group, Inc. regularly publishes financial and other information in the Investor Information section of the company’s website. For more information about HCI Group and its subsidiaries, visit www.hcigroup.com.

Forward-Looking Statements
This news release may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “estimate,” “expect,” “intend,” “plan,” “confident,” “prospects” and “project” and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various risks and uncertainties. For example, the estimation of reserves for losses and loss adjustment expenses is an inherently imprecise process involving many assumptions and considerable management judgment. Some of these risks and uncertainties are identified in the company’s filings with the Securities and Exchange Commission. Should any risks or uncertainties develop into actual events, these developments could have material adverse effects on the company’s business, financial condition and results of operations. HCI Group, Inc. disclaims all obligations to update any forward-looking statements.

Company Contact:
Bill Broomall, CFA
Investor Relations
HCI Group, Inc.
Tel (813) 776-1012
wbroomall@typtap.com

Investor Relations Contact:
Matt Glover
Gateway Group, Inc.
Tel (949) 574-3860
HCI@gateway-grp.com

– Tables to follow –

HCI GROUP, INC. AND SUBSIDIARIES
Selected Financial Metrics
(Dollar amounts in thousands, except per share amounts)
 
    Q2 2024       Q2 2023  
    (Unaudited)       (Unaudited)  
Insurance Operations              
Gross Written Premiums:              
Homeowners Choice   $ 191,775       $ 140,544  
TypTap Insurance Company     79,093         39,438  
Condo Owners Reciprocal Exchange     36,034          
Total Gross Written Premiums     306,902         179,982  
               
Gross Premiums Earned:              
Homeowners Choice     143,703         96,875  
TypTap Insurance Company     107,055         85,071  
Condo Owners Reciprocal Exchange     12,803          
Total Gross Premiums Earned     263,561         181,946  
               
Gross Premiums Earned Loss Ratio     29.7 %       34.0 %
               
Per Share Metrics              
GAAP Diluted EPS   $ 4.24       $ 1.28  
Non-GAAP Adjusted Diluted EPS   $ 4.21       $ 1.22  
               
Dividends per share   $ 0.40       $ 0.40  
               
Book value per share at the end of period   $ 42.72       $ 21.92  
               
Shares outstanding at the end of period     10,472,741         8,594,764  
                   
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar amounts in thousands)
 
    June 30, 2024     December 31, 2023  
    (Unaudited)        
Assets            
Fixed-maturity securities, available for sale, at fair value (amortized cost: $643,892 and $387,687, respectively and allowance for credit losses: $0 and $0, respectively)   $ 640,242     $ 383,238  
Equity securities, at fair value (cost: $49,192 and $44,011, respectively)     53,886       45,537  
Limited partnership investments     21,856       23,583  
Real estate investments     73,507       67,893  
Total investments     789,491       520,251  
             
Cash and cash equivalents     445,829       536,478  
Restricted cash     3,303       3,287  
Receivable from maturities of fixed-maturity securities     500       91,085  
Accrued interest and dividends receivable     7,067       3,507  
Income taxes receivable     2,820        
Deferred income taxes, net           512  
Premiums receivable, net (allowance: $4,321 and $3,152, respectively)     58,114       38,037  
Assumed premium receivable     7,562       19,954  
Prepaid reinsurance premiums     123,955       86,232  
Reinsurance recoverable, net of allowance for credit losses:            
Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively)     23,367       19,690  
Unpaid losses and loss adjustment expenses (allowance: $66 and $118, respectively)     279,795       330,604  
Deferred policy acquisition costs     52,564       42,910  
Property and equipment, net     29,449       29,251  
Right-of-use-assets – operating leases     1,296       1,407  
Intangible assets, net     6,432       7,659  
Funds withheld for assumed business     14,353       30,087  
Other assets     65,484       50,365  
             
Total assets   $ 1,911,381     $ 1,811,316  
             
Liabilities and Equity            
Losses and loss adjustment expenses   $ 571,646     $ 585,073  
Unearned premiums     542,839       501,157  
Advance premiums     24,119       15,895  
Reinsurance payable on paid losses and loss adjustment expenses           3,145  
Ceded reinsurance premiums payable     7,950       8,921  
Assumed premiums payable           850  
Accrued expenses     27,860       19,722  
Income tax payable     8,962       7,702  
Deferred income taxes, net     4,328        
Revolving credit facility     48,000        
Long-term debt     184,912       208,495  
Lease liabilities – operating leases     1,305       1,408  
Other liabilities     35,426       35,623  
             
Total liabilities     1,457,347       1,387,991  
             
Commitments and contingencies            
Redeemable noncontrolling interest     791       96,160  
             
Equity:            
Common stock, (no par value, 40,000,000 shares authorized, 10,472,741 and 9,738,183
shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively)
           
Additional paid-in capital     117,968       89,568  
Retained income     331,960       238,438  
Accumulated other comprehensive loss, net of taxes     (2,579 )     (3,163 )
Total stockholders’ equity     447,349       324,843  
Noncontrolling interests     5,894       2,322  
Total equity     453,243       327,165  
             
Total liabilities, redeemable noncontrolling interest, and equity   $ 1,911,381     $ 1,811,316  
 
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(Dollar amounts in thousands, except per share amounts)
 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2024     2023     2024     2023  
Revenue                        
                         
Gross premiums earned   $ 263,561     $ 181,946     $ 520,205     $ 362,014  
Premiums ceded     (76,713 )     (66,390 )     (144,819 )     (136,899 )
                         
Net premiums earned     186,848       115,556       375,386       225,115  
                         
Net investment income     16,881       8,794       30,948       26,509  
Net realized investment gains (losses)     221       (230 )     212       (1,379 )
Net unrealized investment gains     533       897       3,168       1,426  
Policy fee income     1,089       1,469       2,108       2,559  
Other     682       841       1,037       2,126  
                         
Total revenue     206,254       127,327       412,859       256,356  
                         
Expenses                        
                         
Losses and loss adjustment expenses     78,324       61,890       158,246       122,455  
Policy acquisition and other underwriting expenses     23,452       22,618       45,591       45,338  
General and administrative personnel expenses     17,471       14,272       33,745       27,774  
Interest expense     3,452       2,667       6,601       5,468  
Other operating expenses     7,520       5,614       15,220       11,919  
                         
Total expenses     130,219       107,061       259,403       212,954  
                         
Income before income taxes     76,026       20,266       153,456       43,402  
                         
Income tax expense     18,927       5,384       39,401       10,727  
                         
Net income   $ 57,099     $ 14,882     $ 114,055     $ 32,675  
Net income attributable to redeemable noncontrolling interests           (2,337 )     (10,149 )     (4,661 )
Net income attributable to noncontrolling interests     (3,023 )     (102 )     (2,219 )     (233 )
                         
Net income after noncontrolling interests   $ 54,076     $ 12,443     $ 101,687     $ 27,781  
                         
Basic earnings per share   $ 5.18     $ 1.45     $ 9.95     $ 3.23  
                         
Diluted earnings per share   $ 4.24     $ 1.28     $ 8.04     $ 2.81  
                         
Dividends per share   $ 0.40     $ 0.40     $ 0.80     $ 0.80  
 
HCI GROUP, INC. AND SUBSIDIARIES
(Amounts in thousands, except per share amounts)
 
A summary of the numerator and denominator of basic and diluted earnings per common share calculated in accordance with GAAP is presented below.
 
    Three Months Ended     Six Months Ended  
GAAP   June 30, 2024     June 30, 2024  
    Income     Shares (a)     Per Share     Income     Shares (a)     Per Share  
    (Numerator)     (Denominator)     Amount     (Numerator)     (Denominator)     Amount  
Net income   $ 57,099                 $ 114,055              
Less: Net income attributable to redeemable noncontrolling interest                       (10,149 )            
Less: Net income attributable to noncontrolling interests     (3,023 )                 (2,219 )            
Net income attributable to HCI     54,076                   101,687              
Less: Income attributable to participating securities     (2,052 )                 (3,243 )            
Basic Earnings Per Share:                                    
Income allocated to common stockholders     52,024       10,041     $ 5.18       98,444       9,897     $ 9.95  
                                     
Effect of Dilutive Securities:                                    
Stock options           298                   290        
Convertible senior notes     1,753       2,142             3,393       2,212        
Warrants           215                   262        
                                     
Diluted Earnings Per Share:                                    
Income available to common stockholders and assumed conversions   $ 53,777       12,696     $ 4.24     $ 101,837       12,661     $ 8.04  
                                     
(a) Shares in thousands.  
   

Non-GAAP Financial Measures

Adjusted net income is a Non-GAAP financial measure that removes from net income of HCI’s portion of the effect of unrealized gains or losses on equity securities required to be included in results of operations in accordance with Accounting Standards Codification 321. HCI Group believes net income without the effect of volatility in equity prices more accurately depicts operating results. This financial measurement is not recognized in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and should not be viewed as an alternative to GAAP measures of performance. A reconciliation of GAAP Net income to Non-GAAP Adjusted net income and GAAP diluted earnings per share to Non-GAAP Adjusted diluted earnings per share is provided below.

Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income

    Three Months Ended   Six Months Ended
    June 30, 2024   June 30, 2024
GAAP Net income         $ 57,099               $ 114,055      
Net unrealized investment gains   $ (533 )             $ (3,168 )          
Less: Tax effect at 25.041%   $ 133               $ 793            
Net adjustment to Net income         $ (400 )             $ (2,375 )    
Non-GAAP Adjusted Net income         $ 56,699               $ 111,680      
 
HCI GROUP, INC. AND SUBSIDIARIES
(Amounts in thousands, except per share amounts)
 
A summary of the numerator and denominator of the basic and diluted earnings per common share calculated with the Non-GAAP financial measure Adjusted net income is presented below.
 
    Three Months Ended     Six Months Ended  
Non-GAAP   June 30, 2024     June 30, 2024  
    Income     Shares (a)     Per Share     Income     Shares (a)     Per Share  
    (Numerator)     (Denominator)     Amount     (Numerator)     (Denominator)     Amount  
Adjusted net income (non-GAAP)   $ 56,699                 $ 111,680              
Less: Net income attributable to redeemable noncontrolling interest                     $ (10,149 )            
Less: Net loss (income) attributable to noncontrolling interests     (3,018 )                 (2,206 )            
Net income attributable to HCI     53,681                   99,325              
Less: Income attributable to participating securities     (2,037 )                 (3,168 )            
                                     
Basic Earnings Per Share before unrealized gains/losses on equity securities:                                    
Income allocated to common stockholders     51,644       10,041     $ 5.14       96,157       9,897     $ 9.72  
                                     
Effect of Dilutive Securities:                                    
Stock options           298                   290        
Convertible senior notes     1,753       2,142             3,393       2,212        
Warrants           215                   262        
                                     
Diluted Earnings Per Share before unrealized gains/losses on equity securities:                                    
Income available to common stockholders and assumed conversions   $ 53,397     $ 12,696     $ 4.21     $ 99,550     $ 12,661     $ 7.86  
                                     
(a) Shares in thousands.  
   

Reconciliation of GAAP Diluted EPS to Non-GAAP Adjusted Diluted EPS

    Three Months Ended   Six Months Ended
    June 30, 2024   June 30, 2024
GAAP diluted Earnings Per Share         $ 4.24               $ 8.04      
Net unrealized investment gains   $ (0.04 )             $ (0.25 )          
Less: Tax effect at 25.041%   $ 0.01               $ 0.07            
Net adjustment to GAAP diluted EPS         $ (0.03 )             $ (0.18 )    
Non-GAAP Adjusted diluted EPS         $ 4.21               $ 7.86      


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